How can you target the player's walkspeed when the tool is uneqquiped?

Your getting the player's humanoid by going through the hierarchy, but it runs when the Unequipped event fires. So when the Unequipped event fires, the tool gets removed from the character which then you cant access the humanoid. You'd need to use LocalPlayer to get the player's humanoid if this is a local script, as LocalPlayer is the player that the script is running on.

local health = 5
local active = false
local walkSpd = 32
local player = game.Players.LocalPlayer

script.Parent.Equipped:Connect(function()
    active = true
    player.Character.Humanoid.WalkSpeed = walkSpd -- accessing the player's character
end)

script.Parent.Unequipped:Connect(function()
    active = false
    player.Character.Humanoid.WalkSpeed = 16 
end)

while active do -- you dont need to make a if statment
    script.Parent.Parent.Humanoid.Health = script.Parent.Parent.Humanoid.Health + health
    wait(1)
end 

when you equip a tool, it will be added inside player's Character
but when you unequip the tool the parent of it will change to the player's backpack
so the Unequipped Event fires when the tool is already inside your backpack

Certainly this solution isn't the best, but it works

Character = script.Parent.Parent
Player = game:GetService("Players"):WaitForChild(Character.Name)
-- Added Variables Above

health = 5
active = false
walkSpd = 32
script.Parent.Equipped:connect(function()
    active = true
    Character.Humanoid.WalkSpeed = walkSpd
end)

script.Parent.Unequipped:connect(function()
    active = false
    Character .Humanoid.WalkSpeed = 16 --fixed Area :3
end)

while wait(1) do --ignore
    if active then
        script.Parent.Parent.Humanoid.Health = script.Parent.Parent.Humanoid.Health + health
    end
end